Israeli 2012 Tech Exits Top $5.5 Billion

Israeli tech startups were bought out for a record total of $5.5 billion in 2012, according to a report published Monday. The report also suggests a maturity in the Israeli sector with fewer, but larger, deals transacted.

The report by analysts PricewaterhouseCoopers showed 2012 had 50 deals with an average deal size of $111 million, compared with 63 deals with an average size of $81 million in 2011. The report didn’t cover IPOs.

According to Rubi Suliman, who leads PwC’s high-tech practice, the figures reflect a shifting position in Israel. Historically, Israel has been good at building companies and selling them rather than building large multinational enterprises.

“There is a long discussion about whether exits are good for Israel or should we build larger multinational companies,” he said. “In the last years we have grown almost no large multinational companies, but rather everything was being sold much earlier.”

The report shows that the average deal size has grown nearly 3½ times, from $32 million in 2008. Mr. Suliman said the growth in deal size showed the increasing maturity of the market.

“Recently, we are seeing Israeli companies grow, and become world leaders in their areas. We are seeing companies with revenues of over $100 million. We did not see these in the past. They were being sold much earlier, often pre-revenue.”

Mr. Suliman said the growth of the exits was feeding this cycle. “It has matured the market. The exits are contributing to the building of large companies. As a result we are seeing more large investors coming in as they see more large exits being done.”

Given the small number of deals in each market, it was hard to establish any market trends, but Mr. Suliman said he was confident that 2013 would prove to be a strong one for Internet companies. “It is very likely to continue to be a powerhouse for Israeli high-tech growth for years to come.”

However, despite the improving exit picture, this wasn’t feeding into the venture-capital industry, he said. Fundraising remained challenged. “VCs are still having a lot of difficulty in raising funds,” he said. “We hope that the situation will change, but currently we are not seeing the upside. Part of this is that a lot of the Israeli funds have investors in the U.S. and it is part of a world-wide trend.”

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